Key Person Insurance

Rebecca Burchill, CLU, ChFC – Managing Director, Insurance & Financial Planning
April 2024

As business owners and leaders, you’ve poured your heart and soul into building and leading a successful company. Amidst the day-to-day craziness, it’s worthwhile to consider safeguarding your business against unforeseen events that could threaten its stability.

What would you do if your most valuable employee could no longer work? The sudden departure of a key team member can devastate business operations. Even if you’re confident this employee would give two weeks’ notice, a sudden illness, injury or death could make that impossible. But, you can control the financial impact of these unexpected circumstances within your business with Key Person Insurance.

This type of coverage can be invaluable in mitigating the risks associated with the loss of a key employee.

Why Key Person Insurance?

1. Protection Against Financial Loss

Imagine the impact if a key employee – whether it’s the founder, CEO, or a top-performing salesperson – were to unexpectedly pass away or become incapacitated. Aside from the emotional toll, your business could suffer significant financial loss due to decreased revenue, increased expenses for recruitment and training, and disruptions to operations. Key Person Insurance provides a financial cushion to help your business weather such storms by compensating for lost income, covering expenses, and facilitating a smooth transition.

2. Loan and Debt Repayment

If your business has outstanding loans or debts, the sudden loss of a key individual could jeopardize your ability to meet repayment obligations. Key Person Insurance can provide the necessary funds to settle debts, ensuring that your business remains financially solvent and preserving its creditworthiness.

3. Recruitment and Training Costs

Identifying and grooming a replacement for a key employee takes time and resources. Key Person Insurance can help cover the expenses associated with recruiting, hiring, and training, thereby minimizing disruptions to your business and preserving its competitive edge.

4. Shareholder Protection

In businesses with multiple owners, the loss of a key shareholder could have far-reaching consequences. Key Person Insurance can be structured to provide funds for the remaining shareholders to buy out the deceased or incapacitated individual’s shares, ensuring continuity and preventing conflicts over ownership and control.

5. Peace of Mind

Running a business is inherently risky, but having Key Person Insurance in place offers peace of mind knowing that your company is protected against unforeseen events. It allows you to focus on growing your business without constantly worrying about the potential impact of losing a key team member.

How can Lebel & Harriman help?

Key Person Insurance is a proactive measure that every business owner should consider as part of their risk management strategy. By safeguarding your company’s most valuable asset – its people – you’re not only protecting your investment but also ensuring the long-term viability and success of your business.

If you’d like to learn more about how Key Person Insurance can help your business or discuss your specific insurance needs, we can help you navigate the complexities and find the right solutions for your unique situation.

This document is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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